The BBC's Paul Adams"This dispute has spread bitterness" real 28kThe BBC's Khalid Javed"Hundreds turned out for the unveiling of the stone" real 28kIsraeli Prime Minister Ehud Barak"We are doing our best that the three religions will be able to live together" real 28kMayor of Nazareth Ramez Jaraisy"What's happening now is a result of the governmental decision" real 28k

Thousands of triumphant Muslims have unveiled the foundation stone for a controversial mosque near one of the most sacred Christian shrines.

The cornerstone was laid in the shadow of the Christian Basilica of the Annunciation in Nazareth, amid protests from local Christian churches and bitter recriminations from the Vatican.

After the unveiling, crowds of Muslims celebrated by letting off firecrackers and canisters of green smoke, symbolising Islam.

The first stone of the planned four-storey mosque

A BBC correspondent says the streets echoed to the sound of prayers, speeches and songs.

The stone was unveiled by the leader of the town's Islamic Movement, Suleiman Abu Ahmed.

"Today, with the unveiling of the foundation stone, the problems in Nazareth have come to an end," he said.

Under an agreement brokered by the Israeli government, construction of the mosque will not start until next year.

Christian protest

Christians have been given permission to build a plaza for millenium visitors on another part of the same site. They had originally hoped to use the entire plot of land.

We are going to build a mosque ... not a dance hall or a casino

Suleiman Abu Ahmed

In protest, Christian churches in Israel and the Palestinian territories remained closed for a second day on Tuesday.

Vatican spokesman Joachim Navarro Valls said: "The decision of the Israeli Government [to allow the construction] appears to lay the groundwork for conflict and tension in the future between the two religious communities, Christian and Muslim."

But in a BBC interview, the Israeli Prime Minister, Ehud Barak, gave an assurance that the mosque posed no threat to other religions.

Brothers

Mr Ahmed also tried to play down the controversy, saying the mosque was "the brother of the church".

"We are going to build a mosque to pray to God, the same God of Christians, Muslims and Jews. We are not going to build on this land a dance hall or a casino," he said.

The mosque will be dedicated to Shihab al-Din, said to be the nephew of the Muslim hero Saladin who drove Christian Crusaders out of Jerusalem in the 12th Century.

A worshiper at the locked gate of the Holy Sepulchre in Jerusalem

Christians believe the basilica is located at the site where the Virgin Mary was told she would give birth to Jesus.

Its doors were bolted on Tuesday, as were those of the two other main places of Christian pilgrimage - the Church of the Nativity in Bethlehem, and the Church of the Holy Sepulchre in Jerusalem.

Christians have complained that their rights are being neglected by an Israeli Government more interested in finding favour with the country's increasingly-influential Islamic movement.

The government says it merely wants to preserve inter-faith coexistence in a land held sacred by three great religions.

The Palestinian authority has taken the side of the Christian church. The mufti of Jerusalem, Ikrima Sabri, stayed away from the Nazareth ceremony.

In return Palestinian leaders are hoping the Vatican will support their claims to Jerusalem.